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Replies to post #5050 on Commodity Futures Trading
Here’s the understudy way to study this: go long commodities! - because obviously China buying in vast quantities for years to come, right? Expect lots of stories like that.
Here’s the star way to think about it: what does it really say if China is stocking up so much? Has there ever been a point during trade tensions where anyone has ever threatened not to sell to China? The issue is always that trade partners don’t ONLY want to sell raw materials and unprocessed commodities to it, but rather to hold more of the technology and value chain themselves. That is as true for Europe as it is for the US.
What possible disruption could be on the horizon that would require China to have a large enough buffer of all conceivable inputs --in remote inland areas to boot-- that it needs to use up its precious USD reserves in a bulk splurge now?
“Geopolitics”, as we say euphemistically? That hardly suggests the benign, sunny uplands that ECB is going to try to sell today, with its eyes firmly on its own shoes, RBA-style.
It can’t be on *imminent* concerns of the US acting on China’s USD access because all these purchases will presumably still be made in those precious USD, even in vast size,… right? Or is the idea with THAT much buying, a shift to CNY can be accelerated? For commodity sellers, that’s something to consider. So is that this would be a multi-year bull-run – and then a very sharp stop.
Indeed, theoretically China would no longer have to worry about not having enough of X, or Y, or Z; and it could simply stop buying from industry/country X, or Y, or Z for a year or two if prices were too high,….and watch them collapse,…until prices were again amenable, or the asset was for sale, or the relevant government ‘came to its senses’ on foreign policy.
